Don’t Let Uncle Sam Babysit Your Savings

Dont Let Uncle Sam Babysit Your Savings

Please stop acting like you’ve won the lottery when you get your tax refund – that was your money to begin with!  I know some people purposely have their employer withhold too much money on their paychecks so they get a big refund.  Why is this a bad idea?

First, you are earning 0% interest on this money.  If you have debt of any kind – credit cards, student loans, or a mortgage – you’re better off paying down those interest charging accounts, rather than letting Uncle Sam hang onto it interest-free.

Second, some of you are living paycheck-to-paycheck 11 months out of the year, then acting like you’re rich the month your refund hits your account.  I’d much rather see you adjust your withholdings so that your refund is very small, but you have more financial breathing room the rest of the year.

Third, if you have a financial emergency, you cannot access the money you’ve overpaid the government until Tax Time.  Big mistake!  You may end up having to borrow money to fix your car or pay that medical bill.  Instead of overpaying your taxes, have your employer split deposit your check and put that money into a savings account.

Rather than getting a tax refund of several thousand dollars every year, adjust your withholdings – with the assistance of your CPA or tax professional – and put that money to better use, to help you make progress on your journey to financial health.

**Always consult with your tax professional before adjusting your withholdings.  Everyone’s tax situation is unique.  Christine Luken and 7 Pillars LLC is not responsible for any tax or financial liability arising from the advice on this website.**
Spread the Word!
Christine Luken
 

Click Here to Leave a Comment Below 14 comments
Scott - March 3, 2017

I’ve preached this for all of my adult life. The fact is, this is the only way some people can save. It is better than nothing!

Reply
Keikilani - March 3, 2017

This is really good advice. I am consulting our Tax Consultant to make sure we are set up for the most financial success this year.

Reply
Catherine Sargent - March 3, 2017

This is a great post and something I never really thought about it. I will talk with my husband and may adjust how much is taken out of my account.

Reply
Mandy Carter - March 3, 2017

Great way of looking at it. Sounds like good advice for those have too much withheld each check.

Reply
Liz Mays - March 3, 2017

You make some really good points in this video. It would be much better for me to hang onto that money and earn interest on it.

Reply
Ashley - March 3, 2017

We always get a refund but we don’t have too much taken out. I feel like it is a nice balance.

Reply
carissa garabedian - March 3, 2017

Such good advice, I still have so much to learn. These are great tips for us , I am going to talk to our accountant

Reply
Bree - March 3, 2017

I completely agree with you. It’s important to just save throughout the year.

Reply
Stephanie Jeannot - March 3, 2017

Wow. This is so real. Tax refunds should be used in Amore beneficial way. So true.

Reply
Claudia Krusch - March 3, 2017

Love your post! So true! We’re working right now to fine tune that!

Reply
Cherise Kachelmuss - March 3, 2017

While we don’t live paycheck to paycheck I admit I like getting a “big” refund at tax time. We use that as bonus vacation money that we probably wouldn’t have set aside otherwise.

Reply
Emily - March 4, 2017

My husband and I realized this a few years and decided to practice this idea. It has been a great change for us with our taxes, and one we do mention to others who brag about the crazy large tax refund they are getting.

Reply
Nicole - March 4, 2017

I agree! People would tell me I was crazy for claiming more than 1 withholding, but I also have 401k coming out of my paycheck, so I’d like to hold onto as much of my money as I can.

Reply
Jennifer - March 4, 2017

This is such great advice. Savings is something my husband and I have been diligent about for a long time and something I want to teach my kids. We usually have to pay at the end of the year so we are a little on the other end of the spectrum.

Reply

Leave a Reply: